Correlation Between CG Hi and Leaders Technology

Can any of the company-specific risk be diversified away by investing in both CG Hi and Leaders Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CG Hi and Leaders Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CG Hi Tech and Leaders Technology Investment, you can compare the effects of market volatilities on CG Hi and Leaders Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CG Hi with a short position of Leaders Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CG Hi and Leaders Technology.

Diversification Opportunities for CG Hi and Leaders Technology

-0.8

Correlation Coefficient

CG Hi  Leaders Technology

Pay attention - limited upside

The 3 months correlation between 264660 and Leaders is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CG Hi Tech and Leaders Technology Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leaders Technology and CG Hi is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CG Hi Tech are associated (or correlated) with Leaders Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leaders Technology has no effect on the direction of CG Hi i.e., CG Hi and Leaders Technology go up and down completely randomly.

Pair Corralation between CG Hi and Leaders Technology

Assuming the 90 days trading horizon CG Hi Tech is expected to generate 0.93 times more return on investment than Leaders Technology. However, CG Hi Tech is 1.07 times less risky than Leaders Technology. It trades about 0.14 of its potential returns per unit of risk. Leaders Technology Investment is currently generating about -0.01 per unit of risk. If you would invest  951,386  in CG Hi Tech on December 26, 2024 and sell it today you would earn a total of  382,614  from holding CG Hi Tech or generate 40.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CG Hi Tech  vs.  Leaders Technology Investment

CG Hi Tech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CG Hi Tech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CG Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Leaders Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leaders Technology Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Leaders Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CG Hi and Leaders Technology

The main advantage of trading using opposite CG Hi and Leaders Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CG Hi position performs unexpectedly, Leaders Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Leaders Technology will offset losses from the drop in Leaders Technology's long position.

The idea behind CG Hi Tech and Leaders Technology Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.